Congress Finds BAPCPA Ineffective?

Late last week, the Congressional Research Service, the public policy arm and “Congress’ think tank,” released a report entitled “Consumer Bankruptcy and Household Debt” which focused on the effect of its 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in reducing consumer bankruptcy filings.

As we all know, filings have increased every calendar quarter suggesting that “absent a sharp post-recession reduction, BAPCPA will not result in a permanent reduction in the rate of consumer bankruptcy.”

The report concluded 97% of all household indebtedness is comprised of mortgage debt and consumer credit, causing them to be the major categories of household debt. Consumer credit includes revolving credit (credit card debt) and non-revolving credit such as automobile, education, and mobile home loans. The report separated home equity lending from the mortgage loan category because of its ability to substitute for consumer credit.

The report provided statistical information supporting the increase in the percentage of household income used to pay debt over the past 10 years but not at such a rapid rate to justify the increase in personal bankruptcies.